European companies still have a stronger foothold in China's growing clean technology market than their American counterparts, Xiaomei Tan, China expert at the World Resources Institute (WRI), told EURACTIV in an interview.
Xiaomei Tan is an associate at the World Resources Institute (WRI), an environmental think-tank. She heads the China Programme of the Institute's Climate and Energy Programme (CEP).
She was speaking to Susanna Ala-Kurikka.
How would you evaluate China's current efforts on clean technology development?
I think China is doing a really good job. Compared to the US, the Chinese obviously have some characteristics.
The Chinese efforts are very systematic, meaning that they contain two important components. The first is front-end policy support. That is when the government identifies a clean technology that is good for China and then provides direct R&D support to Chinese universities and companies, for instance for the development of wind energy in China.
In 1996, China started a programme called 'Ride the Wind'. Back then China had zero wind energy technology, really starting from scratch. So the government set up this technology transfer scheme to import foreign technologies through joint ventures.
The government hopes that the foreign investors want to take advantage of the Chinese market and give out some technologies to Chinese local partners.
During this technology transfer process, the government constantly gave R&D support to local partners to develop their technology capacities. The government also identified some major technology developers like Goldwind and Sinovel. They were both among the top ten wind turbine producers in 2009.
In such a short time, China has quickly become a very important turbine manufacturer in the world. It really benefited from the government's front-end R&D support that it gave directly to those turbine manufacturers.
The second component is back-end policy pull, when China is able to manufacture a certain green technology, whether it's wind turbines, or supercritical (SC) or ultra-supercritical (USC) technology, which is a technology that can increase the temperature and pressure of a turbine and lead to more efficiency in coal-fired power generation.
It only took China fifteen years to switch from being a zero technology owner to a global manufacturing power of this technology.
Since China has been able to manufacture that, the government has given financial incentives to Chinese coal-fired power plants to buy Chinese-made USC technology in exchange for tax credits.
The government also uses mandates. That is, any new coal-fired power plant with a capacity equal to or more than 600 MW has to use SC/USC technology.
Because of financial incentives and mandates, the cost of the technology comes down quickly because it has a huge market. And because the price comes down, the technology gets diffused more and more widely.
China has the second-highest number of SC/USC units in the world after the US and it only started transferring the technology fifteen years ago.
Another way in which the Chinese approach is different from that of the US is that it provides investors with long-term certainty that the government will constantly support green technology development.
US policy really depends on the Congress, which every two years renews its solar or wind energy initiative. This doesn't create certainty for investors, who then don't know if they want to put in lots of money into their field if the policy does not exist any more in two years.
The Chinese way is long-term stability and long-term certainty that the government will always support this. China's Five-Year Plan and Medium-to-Long-Term Science and Technology National Plan all have development of clean technology as a priority. This provides the market with very good signals.
Would you say that China's clean technology development is much more driven by the government than in the US, for instance?
That's true. The US is more market-driven, but it is at the same time very much influenced by the government's policy signals.
Considering how much clean technology development is happening in China at the moment, what is the rationale for technology transfer from Western countries into China? Does China need a mechanism for that in the new climate change treaty being negotiated at the moment?
In terms of technology transfer, there are several issues. In the Chinese context, technology transfer is a bit different from what happens everywhere else.
The first issue is IPR [intellectual property rights] as many foreign investors have concerns about Chinese rules for IPR.
The second is the governance issue, China's political and economic structure. For instance, so many green technology developers are state-owned enterprises. Based on our case studies, in the 1990s when the Chinese were buying technologies like USC, the purchase was first made by a Chinese government agency. It then gave the technology to several state-owned companies.
To Western business practice, that's just wrong because only one entity can buy a technology, the IPR and then use it; that's the Western practice. But in the Chinese practice, because the government owns this – it's like a father and naturally your sons can use it.
It's just a totally different context and it causes some conflict and distrust between technology providers in the West and technology users in China. It's really determined by China's political and economic system, which is state-owned enterprises. State-owned enterprises belong to the government, so when the government buys something they can all use it.
How would you imagine a clean tech transfer mechanism could work, considering all these IPR issues?
That's a good question.
I think we should still largely rely on the market as a basic driver. At the end of the day, the technology is owned by multinational companies and their willingness to transfer technology is the key.
However, considering that climate change is a common threat, national governments in developed countries should come up with incentive policies to encourage their multinational companies to invest in innovating clean technology and give out advanced clean technology at a faster pace.
National governments in developing countries should craft more effective policy to absorb and deploy existing clean technology. And international bodies such as the UNFCCC [United Nations Framework Convention on Climate Change] should design an international mechanism that smoothens the transfer of clean technology across borders.
In the past two years, I have been leading a study about technology transfer and deployment in China. We interviewed lots of multinational companies whose IP is not easily stolen. But they said that because of China's record, they only go to China with technology that is at least five to eight years old.
That's part of the negative impact of this distrust.
Who would you say is China's preferred partner in clean tech collaboration? Is there a preference for the US over the EU when it comes to making business deals?
Based on our research, European companies definitely benefit from China's green technology market more than US companies. US companies realise this and they now try to catch up.
Steven Chu, the DOE [Department of Energy] minister, now has this US-China bilateral cooperation agreement. Within this agreement they want to focus on three technologies: one is nuclear, because in the past China's huge nuclear power generation market has always been taken by French companies and Japanese companies. It's one field that the US wants to enter.
The second field that Steven Chu talks about is building efficiency. The third field they want to come in is CCS [carbon capture and storage]. They want to cooperate with China on CCS because the US owns most IP related to CCS and Europe is a competitor in this field.
I have studied wind energy technology where European companies definitely take up more of the market and benefit more from it because many Chinese wind turbine producers don't own key technologies – they all buy production licenses from European companies.
Clean coal technology, especially SC/USC technology, Chinese companies purchase mainly from Siemens, Mitsubishi and Toshiba. No US companies benefit from China's huge SC/USC market.
So I think Europeans are definitely doing better so far, but the US is trying to catch up.